Several federal agencies offer mortgage help. The government-created corporations Fannie Mae and Freddie Mac buy up mortgages from private lenders, which makes it possible for lenders to offer lower interest rates. The Federal Housing Authority works with lenders so that buyers need a smaller down payment. The Rural Housing Authority makes loans to home buyers in rural areas.
Many states and local governments offer their own assistance programs. In California, for example, the California Housing Finance Agency offers programs that help homeowners who meet the income guidelines find a low-interest loan and manage a down payment.
According to HUD, supporting home ownership helps low-income families improve their financial situation. In contrast to renters, homeowners can claim tax deductions for home ownership and as the value of their home equity grows, so will their financial security.
State and federal programs function in a variety of ways. In California, the government will help low-income buyers take out a low-interest, fixed-rate 30-year mortgage. Another state program will help buyers take out a secondary loan to cover the down payment. The FHA, on the other hand, uses mortgage insurance to convince lenders to agree to a smaller down payment; with FHA help, buyers need as little as 3.5 percent down.
Many private groups offer low-income homebuyers mortgage assistance. Government websites maintain information on these: The FHA lists groups that provide down payment grants, and HUD provides lists of non-governmental state groups online.